Budgeting for Assad

It is now fortunate for Obama that he did not intervene militarily in Syria. Had he, his budget strategy would have been the first casualty. With his fiscal objectives and negotiating leverage already precariously balanced on wishful thinking, regardless of Syria’s cost it would have been a budget blow he could now ill-afford.

To understand the fiscal threat a Syrian military intervention poses for Obama’s budget strategy, take a look at the budget he released earlier this year. The Congressional Budget Office’s report on Obama’s budget estimated it would reduce the federal deficit by $1.146 trillion -- by raising $974 billion in taxes and reducing spending $172 billion over the next ten years.

The estimate’s drawback is that it is compared to CBO’s current assumptions -- assumptions officially required to extrapolate from current law and spending levels. For this reason, the Obama budget’s biggest spending “savings” came from simply including far less spending for Afghanistan military spending than CBO was required by law to assume.

As CBO’s May report stated: “Consequently, projected outlays for overseas contingency operations [“military operations in Afghanistan and for related activities”] under the President’s proposal are $601 billion less over the 2014-2023 period than those in CBO’s baseline.”

Of course these anticipated spending reductions are welcome, but are already factored in by both parties. Republicans, in particular, will not accept these as spending cuts in any budget negotiations.

However, if a U.S. intervention in Syria had taken place, military spending would not fall to the lower levels expected, but increase above them. The only question: By how much? That of course would depend on how long and how expansive intervention was. Those crucial variables have proven ones no one can accurately estimate beforehand -- especially in a region where conflicts are better measured in centuries than years.

Obama faced seeing these assumed military savings, on which his budget strategy depends, turn into unassumed costs. It was similar to the circumstances of a financially strapped family with large and prolonged medical costs having expected them to end. The family was not going to count this cessation as “savings” that could pay for new spending, but just as a welcome return to normal. Then, instead of medical bills ending, new bills started coming.

When Obama confronted Congress over undoing sequestration earlier this year, he lost. He lost because sequestration was already in law and going to happen. Congress refused to stop it, and the only action they have taken is to buffer its effect with greater flexibility to move money to the most sensitive programs -- making its continuation even more likely.

Obama only won in a fiscal fight when it came to taxes. More specifically, he won when the situation did not require legislation and increased taxes were going to take effect unless new legislation prevented it.

We can only presume now that the administration’s budget strategy follows its latest budget. That budget was only able to produce $172 billion in reduced spending over 10 years, despite including the $601 billion assumed military savings in Afghanistan. That means there was substantial new additional spending.

On top of the included Afghan military savings, Obama’s budget also claimed a $290 billion reduction in future emergency spending, $301 billion by claiming to further reduce annual federal spending beginning in 2017 (the year after he leaves office), and $92 billion in lower debt service costs -- largely the product of his proposed $974 billion tax increase.

Beneath all these savings -- almost half of which came from military savings -- the Obama budget contained $1.112 trillion in new spending over the next decade. For what? Undoing sequestration’s spending cuts.

If military intervention in Syria had taken place, it would have cost the administration more than just political resources. It would have undercut their likely budget offer -- one already light on spending cuts -- to Republicans already skeptical of their negotiating sincerity.

If there is one area where Obama is currently more resource-constrained than his political capital account, it is in America’s fiscal resources and his ability to persuade Congress and the country to accept even higher spending. Without the presumed military savings, his desire for more spending would lack cover. And had military intervention taken place, those savings would be disappearing.

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